Before you begin reaching out to angel investors in hopes of funding your startup, you need to make sure you’ve gathered all the correct information. To make sure you’re well prepared to approach investors and secure startup funding, we’ve put together a list of questions you must know before pitching to angel investors.
- Do you know your numbers?
To secure an investment in your business, you will need to impress the angel investors with your financial projections and be able to speak confidently about your projected business growth. You need to know how your business will make money, at what point you will break even, and you must have a valuation of your business to find out what your company is worth. To impress your investors and demonstrate you’ve done your research and have a well thought out business plan, you need to know exactly what your market looks like. To do this, you must provide your investors with the marketing metrics they care about and demonstrate you know your market well.
- Have you correctly calculated your expenses?
Oftentimes, when calculating expenses, business owners overlook the need to pay themselves. Make sure you factor in your own salary as part of the projected expenses. Investors expect to see this calculated as part of the expenses, and investors respect that you need to pay yourself. You also need to make sure it is within reason. Business owners are expected to take a pay cut when starting a business, so don’t calculate a $10,000 per month salary for your income. The angel investors aren’t looking to help you pay for a flashy new sports car.
- How much equity should you offer?
It can be tempting to give a higher percentage of your company in exchange for a larger investment in your business, but make sure you don’t give more than one third of your business. As your business grows, you may need additional funding, but if you’ve already given away more than a third of your business, that doesn’t leave much room for equity funding.
- How much investment do you need?
Investment amounts are steadily increasing, with an average angel investment of almost a million dollars. Make sure to use all your data and calculations to figure out how much you need to cover the cost of your annual business expenses and make sure to also include a bit of a cushion for any unexpected expenses. As long as you can clearly outline how the funding will be used, it will seem reasonable to potential angel investors.
These four questions are part of the essentials of pitching to investors. If you know the answers to these questions, you will be better prepared to answer the questions you will be asked when pitching to angel investors. You can also learn more helpful tips about pitching to angel investors by reviewing How to Attract Angel Investors.
To help you calculate your numbers, download and complete the 6 Marketing Metrics Your Investors Care About.